Purchasing foreclosures, tips, potential gotchas?
 

5 Years ago we sold our home in the ‘burbs, downsized and moved into an apt in town.

We love living in town so much more than the burbs. In the apr we enjoy that things are new and when there’s a problem, it’s not my problem.

The missus is watching the grandkids, 5 days a week, one is about 3.5 and the other is about 7 months. Our apt is at the lower limit of a size that’s comfortable for us, but below that limit when the grandkids are here (45-55 hrs/wk). We also aren’t building any equity so we are thinking that we are ready to get back into our own place.

Very near where we live there’s a foreclosure that sounds pretty good at a decent price. We have driven past and seen the photos online. Before we get too far along, I’m curious about what we should do and look at and find out if/before/when attempting to buy a foreclosure.

Per the Internet, you need to ensure that there are no liens on the property, like taxes, equity loans or other debt that may need to be paid before you can own the home.

What’s the best way to find out what liens are on the property?

What’s the best way to negotiate a price on the property? I assume the bank doesn’t want to give it away, but they probably also don’t want to hold on to it for long either.

Do you need to get a realtor that’s familiar with foreclosures?

Advice and recommendations welcome and requested.

Thanks

Good luck wit dat.

Two, I say TWO, foreclosures got away from me nearby recently. I couldn't get anybody to tell me who owns the properties, if they had been appraised, are they or when will they be for sale, and how much, etc. Next thing I knew there were realtor signs on them and NOT priced at a discount.

Blessed is the wife for raising the grandkids. Way more than a full-time job that is. And in an apartment no less!

I would have thought a legal search should uncover everything, if its too good to be true it probably isn't

Mrs Ahab and I had flights booked to fly out in a few weeks to bid on a 1935 Alpine hunting lodge up for auction

We backed out when we found out the auction was for half the property. We didn't even want to know what was involved in buying the other half

I think this has passed the auction state and is now for sale by a realtor. The price is decent, but not shockingly low. It's been for sale a bit. We aren't quite ready to buy as our lease runs out in the early spring, so it may or may not still be available then.

I frequently tell her that she's a saint. I took vacation and watched them for about 1.5 weeks when she had surgery for a detached retina, and I've watched them for a few hours here and there. It's darn tough.

Yeah, this isn't in "too good to be true" territory by any means. I'm assuming that a decent realtor and/or the usual title search would do the trick.

Wow, bizarre, only half of the property.

I'm similar to Crowbob. Nobody never knows anything. Damn realtors are either too lazy or out of the loop somehow.

Sort of annoys me as I see stuff I would like to own for cheap pretty regularly.

Someone has the secret decoder ring on these. I want it too.

It doesn't cost much to hire a real estate attorney who can quickly advise you if the property is worth the effort.

We looked at a few properties like this ( SFH ) in our area. My belief is that whomever is the lien holder they limit information to the average Joe to "0". In fact there was 1 home that was only available by bidding online. Which looked like total scam. No one can ever give you a timeline or date to close or even responding to a legitimate offer.

I think all this sandbagging and mystery is an excuse to milk the system ( our tax dollars) for default insurance if the loan is conforming. And if it is all the fees, penalties and % overdue just rack up month over month that they will collect when it's sold.

We gave up when we couldn't get a straight answer out of anyone on any of these properties

One vote for you to keep enjoying your simplified lifestyle before complicating it.

Were a lot of foreclosures around here 5 years ago........Had a few friends thinking they would get rich overnight. In reality,hundreds of others had the same idea; driving the price up to full retail.....Most of those homes had been seriously neglected.....

One example: A friend of mine passed and his wife had to let the house go back to the bank. House sat the winter with no heat. Frozen pipes broke.......Needed new flooring and sheet rock......Then the mold set in......None of this was disclosed.........

Proceed with extreme caution.......

I've attended a few auctions on the courthouse steps.
An Escrow/Title company can get the full title report that will show any liens. This is vital information before bidding.
There are those making great money flipping foreclosures, enough that others without experience jump in and get stung.


I'm not going to type out the entire process or explain all the ins and outs (maybe when I have more time).
While it's not rocket surgery, some basic knowledge is required.
Just because it was purchased at an auction doesn't guarantee it was a good deal.

One interesting thought I had: Here I am, in the lobby of the courthouse. Several auctions are taking place, all at once. In order to bid, one must present cashier's checks at least up to the minimum bid amount, as the property must be paid in full as soon as the auctioneer says "SOLD!"
If the minimum bid is $200,000, bidders will bring several checks- One for 200k, and a handful of 10k checks to cover what they are willing to pay. If the winning bid is 232k, the winning bidder hands over checks totaling 240, getting a refund of the difference at closing.

So here we are. I look around this large room, with so many people going to and fro.
Then it hit me-
Half the people in this room are carrying hundreds of thousands of dollars.
The other half of the people in this room are trying to scrape up $50 to make bail.

Winning a big foreclosure a couple years after the '08 meltdown changed my financial life.

But it was difficult and fairly scary.

Many difficulties. First, they usually don't happen as scheduled. They get postponed 90-95% of the time. So you need patience and optimism.

Then, you have to have full cash on hand. Combined with the fact that they get continued for months in end, it's difficult to have that much money liquid and ready, for something that might never even happen. For me, it was over $1,000,000 cash needed. And yes, they check to see that you have it, and they count it, before you can bid.

Then there's the title issues. Like most, I had done a title search, but did not have a title insurance policy. So you never know for sure. And there's other possible post auction legal issues (I had to deal with many, some because there was a receiver in place at the property, and some because of some bizarre issues).

The actual auction is of course stressful, esp.when the bidding gets over 7 figures and you're not sure what the right price is anymore (because you've already blown last the amount you'd thought you'd stop at) but that was a kind of fun stress. It’s a bit bizarre doing a major transaction literally outside on the courthouse steps, unlike normal transactions that take months, inspections, contracts, negotiations, etc. this is over in 10 minutes start to finish. They take your cash and you’re suddenly the owner.

Very interesting process.

I saw the exact same thing happen across the street ...don't know about disclosure....BoA "owned" it....and many more....same time frame. Ancient history by now tho'...at least here.

they milk the PMI that they make the low down payment guys buy for years

the bank [ B of A] will NOT admit they own he property and leave the title in the buyers name for the PMI

when the PMI runs out the bank will package the property with others
and sell to investors or an other bank

I watched this happen next door
tryed to bid in 08 but the bank would NOT admit ownership :mad:
I only knew B of A owned it by talking to inspectors they sent out
no action until the PMI ran out , PMI paid taxes so NO tax sale
then sold to another bank in secret only found that out when new inspectors showed up
finally auctioned in late 2017 after the PMI ran out ten years after the repo/FC
by then prices recovered pricing me out

btw the house burned partly and was torn down by the gov in 2014
lot resold with leans from the teardown so the first flipper lost money

btw2 the home sold for 300k in 06 the lot went for 105k in 2018 to the builder who hopes to get 400k out of the new house now being built

Just lucky....and good eh ;)?

If it has, indeed, been taken back by the lender during a trustee's sale, then you would just make an offer using the standard form real estate contract used in your state through a real estate broker who represents you. You would purchase the house "free and clear" from any and all liens and encumbrances. This means free from any loans and the prorata real estate taxes would be fully paid by the lender up to your time of purchase prior to transfer to you. Just make sure your offer is subject to clear title. If your offer is accepted (Negotiate! Don't offer their asking price unless you live in a place where it is a pure seller market), you will receive a Preliminary Title Report that shows all of the exceptions to title that come with the house. You will see easements, HOA agreements, and other things. Make sure all taxes or any assessments you do not want to pay are not on the PTR. If you need help reading the PTR, I would be glad to review it for you. I would hire a really good house inspector to go through every inch of the house to make sure it doesn't need any work that might surprise you. You should make sure the utilities are turned on prior to the inspection to make sure everything works as it should.

Thanks, I think that's the situation that this house is in. I don't think this is a foreclosure that would require bidding.

Bought a house like this. Fully knowing it needed remediation. It wasn't a cheap house either, but it was the only way we could afford what we wanted in our market at that time.
We got to inspect it before we closed.

Just be warned - it's extremely expensive to do it right.
Like $20k and up expensive for a full basement. Then all the systems need replacing - a/c heat et al. They are all in there too and water flows down...

Someone already said you need cash in hand. Top tip - even though you don't have to - is to pay for title insurance to protect yourself at closing. It makes taking a mortgage out when it's deemed habitable much easier. They force you to pay twice if you do this (which is aggravating) but its worth it in the end. The one thing about title insurance is that you are 99% sure it's free of encumbrances. If it isn't they won't issue.

The other thing to note is if you have a buyers realtor they hate these sales. They either get nothing or a low percentage. Expect them to try to steer you to a property their group represents.

Title search, make sure you are buying from the seller, many scams out there. Any title company can do this for you, usually for free.

Do not buy a note, or on the courthouse steps, you could be buying a 2nd or 3rd and have the 1st mortgage in front of you. You will get raped at an auction like Auction.com

ALWAYS buy a listed REO from the listing agent; he will be doubly motivated to sell you the property and likely let you know what his BPO price is, which is what the bank relies on (with an appraisal) to set the list price.

Get an inspection, yes it is as is but banks will sometimes credit for repairs. Like a ropey car; the most expensive REO is sometimes the cheapest REO. Roof, plumbing, wiring, are unknowns, a bank will credit for these as they will then need to disclose same to any other buyer. Cosmetics, things you can see (missing appliances) are not credit items, you saw and accepted them when offering. Remember, no one re-roofs or re-plumbs a home in the months leading to foreclosure, get a bid from a contractor to show the bank.

Make sure you get the bank to pay for the closing costs you are entitled to; the agent will tell you how far you can push it.

It doesn't matter all that much which bank it is; having an account at BofA won't help nor $100k at JP Morgan Chase, they don't care. Let the listing agent guide you, he wants this sale, if it is a flip, tell him he can have the listing.

Thanks, more good stuff there